The hyphen (dash) does not need to be placed anywhere in that particular sentence, but it can be placed between "inner" and "city". You do however require commas in the sentence; "Basketball, which has long been thought to be an inner city game, is extremely popular in the suburbs."
Dashes in this sentence can be used instead of commas to denote the appositive phrase. So, you can write this sentence like this: Basketball - which has long been thought to be an inner city game - is extremely popular in the suburbs.
